Don’t Get Hosed When it Comes to Investment Advisory Fees

Ok, so you’re intrigued by sustainable investing. You don’t want to sacrifice your values when it comes to your IRA or 401k. Got it. But, how much are you paying to have an account with a full service advisor or a digital platform regardless of sustainability?

First, one must learn what a Basis Point is. Basis points, written as bps and often pronounced as ‘bips’, are a standard unit of measure for rates of change in investment products, and represent a ratio, like percentages. One basis point is just 0.01% of a total amount. Fifty basis points is half of 1 percent or 0.50%. If a bond says it is paying 3% that also can be stated as 300 basis points. Now that you know that, at your next dinner party, you can say that you tipped 2000 basis points (or 20%) when the check is paid. Or maybe not.

So what’s the point of basis points, if they’re so similar to percentages? Changes in an investment’s performance can be rather small, so sometimes it’s easier to understand in tens or hundreds of basis points instead of tenths or hundreds of a percent. A full service financial advisor may charge at least 100 basis points (or 1%). Our full service advisor charges 75 bps or 25% less than the average advisor out there.

Online options like robo advisors can get pretty low, but are usually between 25 to 100 basis points, plus whatever extra fees they charge (if any). It can be easy to look at those numbers and think that there’s not much of a difference, but below’s chart can show how it can make a difference.

Annual Investment Advisory Fees Example

Expensive Advisors

Average Investment Advisor

Sustainvest Asset Management

(full service investment advisor)

Sustainfolio (digital based platform)

1.75% (175 bps)

1.00% (100 bps)

0.75% (75 bps)

0.50% (50 bps)

$25,000 account

$437.50

$250

$187.50

$125.00

$500,000 account

$8,750

$5,000

$3,750

$2,500

Advisors, like any other business out there, have to charge for their time and service. But, it’s good to know that there are some ethical advisors out there who aren’t hosing their clients and charging 25-50% more than average. Next time you receive your monthly or quarterly statement from your advisor, be sure to look at what you’re paying and see how it stacks up to this chart. If you can’t find out what you pay your advisor, ask us and we can find it for you.

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Disclosure statement These materials have been independently produced by Sustainvest Asset Management. Sustainvest Asset Management is independent of, and has no affiliation with, Schwab Wealth Investment Advisory Inc. (SWIA), Charles Schwab and Co., Inc. (“CS&Co”) or any of their affiliates (together, “Schwab”). Schwab has not created, supplied, licensed, endorsed or otherwise sanctioned these materials nor has Schwab independently verified any of the information in them. Institutional Intelligent Portfolios® is an automated investment management solution for independent advisors sponsored by SWIA and available exclusively through independent investment advisory firms like Sustainvest Asset Management. Sustainvest Asset Management (not Schwab) is responsible for advising you on the Program, including recommending and selecting a portfolio appropriate for you and managing your portfolio on a discretionary basis. Your portfolio will be held in a brokerage account at Charles Schwab and Co. Institutional Intelligent Portfolios® is a trademark of Charles Schwab and Co., Inc.